Shein and Temu: Disruptors of Fast-Fashion and E-Commerce

seekingalpha04-07

As Shein and Temu gain popularity, their disruptive influence on U.S. e-commerce and fast-fashion has raised concerns about exploitive labor practices, tariff evasion, and data collection, all in an ...

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Temu is also luring away high-income earners as well. Earnest Analytics data shows that ~44% of Temu’s s","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"LU0082616367.USD":"摩根大通美国科技A（dist）","LU0130102774.USD":"Natixis Harris Associates US Equity RA USD","BK4114":"综合货品商店","LU0053666078.USD":"摩根大通基金-美国股票A（离岸）美元","FIVE":"Five Below","LU0353189680.USD":"富国美国全盘成长基金Cl A Acc","LU0211331839.USD":"FRANKLIN MUTUAL GLB DISCOVERY \"A\" (USD) ACC","IE00B19Z3B42.SGD":"Legg Mason ClearBridge - Value A Acc SGD","BK4220":"综合零售","TGT":"塔吉特","LU0256863811.USD":"ALLIANZ US EQUITY \"A\" INC","META":"Meta Platforms","LU0353189763.USD":"ALLSPRING  US ALL CAP GROWTH FUND \"I\" (USD) ACC","GOOG":"谷歌","LU0208291251.USD":"FRANKLIN MUTUAL U.S. VALUE \"A\" (USD) INC","LU0889565833.HKD":"FRANKLIN TECHNOLOGY \"A\" (HKD) ACC","GOOGL":"谷歌A","LVLU":"Lulu's Fashion Lounge Holdings, Inc","LU2430703095.HKD":"WELLINGTON MULTI-ASSET HIGH INCOME \"AM4\" (HKD) INC","LU1066051498.USD":"HSBC GIF GLOBAL EQUITY VOLATILITY FOCUSED \"AM2\" (USD) INC","LU0648001328.SGD":"Natixis Harris Associates US Equity RA SGD","IE0009356076.USD":"JANUS HENDERSON GLOBAL TECHNOLOGY AND INNOVATION \"A2\" (USD) ACC","LU0965509283.SGD":"AB LOW VOLATILITY EQUITY PORTFOLIO \"AD\" (SGDHDG) INC","LU0528227936.USD":"富达环球人口趋势基金A-ACC","FAST":"快扣","LU0068578508.USD":"First Eagle Amundi International Cl AU-C USD","ROST":"罗斯百货有限公司","LU2430703251.USD":"WELLINGTON MULTI-ASSET HIGH INCOME \"AM4\" (USD) INC","IE0002270589.USD":"LEGG MASON CLEARBRIDGE VALUE \"A\" (USD) INC","WMT":"沃尔玛","IE00B1XK9C88.USD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A\" (USD) ACC","ETSY":"Etsy, Inc.","EBAY":"eBay","BK4514":"搜索引擎","RVLV":"Revolve Group, LLC","LU1585245621.USD":"EASTSPRING INV GLOBAL LOW VOLATILITY EQUITY FUND \"A\" (USD) ACC B","LU2430703178.SGD":"WELLINGTON MULTI-ASSET HIGH INCOME \"AM4H\" (SGDHDG) INC","W":"Wayfair","M":"梅西百货","LU1571399168.USD":"ALLSPRING GLOBAL LONG/SHORT EQUITY \"IP\" (USD) ACC","LU0823411888.USD":"法巴消费创新基金 Cap","LU1244550577.SGD":"FTIF - Franklin Global Multi-Asset Income A (Mdis) SGD-H1","LU0433182093.SGD":"First Eagle Amundi International AS-C SGD","IE00B7SZLL34.SGD":"Legg Mason ClearBridge - Value A Acc SGD-H","LU0348723411.USD":"ALLIANZ GLOBAL HI-TECH GROWTH \"A\" (USD) INC","GMV.AU":"G Medical Innovations","LU1814569148.SGD":"WELLINGTON GLOBAL QUALITY GROWTH \"D\" (SGDHDG) ACC","IE0004445239.USD":"JANUS HENDERSON US FORTY \"A2\" (USD) ACC","AMZN":"亚马逊","LU1914381329.SGD":"Allianz Best Styles Global Equity Cl ET Acc H2-SGD"},"translate_title":"申和穆特：快速时尚和电子商务的颠覆者","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"WMT":1,"AMZN":1,"LVLU":1,"M":1,"META":1,"ROST":1,"RVLV":1,"GOOG":1,"FIVE":1,"FAST":1,"ETSY":1,"EBAY":1,"TGT":1,"W":1,"GMV.AU":1,"GOOGL":0.61},"content_text":"As Shein and Temu gain popularity, their disruptive influence on U.S. e-commerce and fast-fashion has raised concerns about exploitive labor practices, tariff evasion, and data collection, all in an ever increasing anti-China environment. BTIG dissects the two businesses, taking a closer look at how the explosion in fast-fashion and online marketplaces has resulted in meteoric growth for the two companies and which U.S. companies are most at risk from their rapidly growing popularity. Shein Shein is the larger of the two with ~$45B in gross merchandise value (GMV) vs $14B in GMV for Temu. Combined, the two generated $25B in GMV in the U.S. alone and are on track to reach $40B a year, twice the amount of Macy’s (M) or Ross (ROST). BTIG attributes this explosive growth to “subverting traditional e-commerce models and capitalizing on duty loopholes.” Both business models rely on ultra-low pricing that has driven rapid share gains in an inflationary environment. Both are impacting legacy U.S. names not only in market share, but by driving up advertising costs in an increasingly competitive environment. And both exploit U.S. de minimis duty rules which allow for tariff exemptions on overseas packages with a value under $800, saving both companies millions of dollars in tariffs. Who stands the most the most to lose from the encroachment of Shein? BTIG estimates the overlap between Shein and Revolve (RVLV) and Lulus Fashion Lounge (LVLU) is roughly 20% but the overlap is much larger at retailers like H&M, Forever 21, and Zara. Temu Temu has become the one of the largest e-commerce companies in the U.S by acting as a middleman between sellers from China and consumers. According to BTIG, Temu’s ability to source deeply discounted products directly from China is largely behind its rapid growth. And like Shein, Temu also benefits from beneficial U.S./China trade policies and de minimis duty rules. Temu markets through social media, specifically TikTok, relying on influencers to attract a young demographic. The company also advertises heavily on Meta (META) and Google (GOOG). By gamifying its ads Temu is able to draw in a larger proportion of younger shoppers. And while exact numbers can’t be confirmed, BTIG estimates that Temu had between 50M and 120M active U.S. users in the first year it launched. Even more impressive is Temu’s retention. Data shows over 28% of Temu customers made another transaction 16 months after their first purchase, nearly double that of Target (TGT) and Walmart (WMT) and “significantly” higher than Etsy (ETSY) and Five Below (FIVE), though still well below Amazon’s (NASDAQ:AMZN) 50% retention. Who stands the most the most to lose from the encroachment of Temu? BTIG’s study shows Amazon (AMZN) with the highest overlap of 25% with companies like Etsy (ETSY), Ebay (EBAY), Wayfair (W), and Target (TGT) with just single-digit overlap. Temu is also luring away high-income earners as well. Earnest Analytics data shows that ~44% of Temu’s sales come from individuals making over $130K per year.  What could go wrong for Shein and Temu? While the growing popularity of Shein and Temu seems to suggest exponential growth, there are some potential headwinds that could disrupt both business models. Shein and Temu rely heavily on manufacturing from China, and the deteriorating relationship between the U.S. and China could cripple the fragile supply chain. U.S. legislation could also stifle Shein and Temu. Claims that both use forced labor and cotton harvested by exploited Uyghurs in the Xinjiang region has raised U.S. scrutiny and resulted in a ban in imports from the region. Shein has been accused of intellectual property infringement by selling clothing designed by other brands. Increased intellectual property laws could force Shein to establish original designs, eroding profits. Recent scrutiny of how TikTok collects user data is also an issue for Shein and Temu with the latter collecting a significant amount of data on U.S. customers. A ban on TikTok could reverberate through other Chinese companies and leave both vulnerable to U.S. enforcement. Customers are also becoming more aware of the use of non-sustainable products. “Shein’s prevalent use of non-recyclable, often industry polluting materials has come under increased scrutiny,” BTIG says. While customers will continue to favor low cost over sustainability, studies show 47% of respondents between 25-49 will pay more for sustainable products.   More on Amazon  Amazon: FCF Turnaround Makes It A Buy Amazon: Third-Party Seller Service Drives E-Commerce Margin Improvement Amazon Stock: Better Than The Numbers Suggest At First Glance Yonyou downgraded as transformative plan takes longer than expected: Bernstein Alphabet, Meta, Amazon in focus as Wedbush sees 'significantly' increased ad spend","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2425643586"}